Fossil, smartwatch, wearables

Fossil Group Inc.’s stock took a sharp downward turn after the company reported another sales decline along with a loss for the first quarter.

Shares of Fossil fell 19.3 percent to $14.64 in after-hours trading. The company’s first-quarter sales dropped 12 percent to $78 million. Net losses tallied $48.2 million and compared with a net income of $5.8 million a year earlier.

Sales fell in all markets and through e-commerce with declines in traditional watches, as well as leather goods and jewelry, which offset any growth in connected watches.

The results amount to $1 loss in earnings per share, compared to a 12 cent gain last year, and come after sales dropped last year.

Chief executive officer Kosta Kartsotis attributed the shaky first quarter to an overall “challenging retail environment and a watch category undergoing significant change.”

Nevertheless, Kartsotis said new strategies Fossil is pursuing will enable the company to “better compete.”

The newness and innovation we are infusing into our fashion accessories is gaining traction with our retail partners and consumers alike, demonstrating that technology can be the catalyst needed to drive growth in the watch category,” Kartsotis said. “We are very excited about the next generation of products we are developing and launching throughout the year.”

Fossil also counted $26.3 million in restructuring costs related to a multiyear turnaround plan, referred to by the company as the “New World Fossil” initiative, launched in January that include layoffs and store closures, mainly in the Americas.

Going forward, the company isn’t expecting things to markedly improve and in its guidance for the full year said sales could decrease another 6 percent and the bottom line could show a loss of 40 cents a share.

“Our New World Fossil initiative will create a leaner and more nimble operating platform capable of better serving our customer and competing in the new retail environment,” Kartsotis said. “Strategically prioritizing initiatives that generate the best returns on our capital investments, we expect to drive operating improvements across our supply chain and be better positioned to improve profitability in a very leverageable business model going forward.”

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